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MODERATOR: This meeting is on the record. And if you have cell phones, pagers, other modes of communication, if you can shut them off or put them on mute, and therefore we can begin.

We have with us two individuals to lead our discussion. Suzanne Maloney is currently at the Saban Center at the Brookings Institute, previously at the State Department policy planning staff; and Barbara Slavin, a long-time reporter and correspondent with various papers, most recently USA Today and, more immediate for our purposes, the author of a new book, "Bitter Friends, Bosom Enemies: Iran, the U.S., and the Twisted Path to Confrontation." Maybe Barbara can explain to us what the title stems from and how she arrived at that, if nothing less, eye-catching title.

What I will do is, for the next few minutes, just lay the groundwork and essentially bring the audience in as soon as possible in terms of your own participation, views and contributions. So, therefore, I want to begin by very generically setting out how you view today as the state of play in Iran.

It's a highly factionalized country historically. But what are the domestic factional alignments? What are the power centers? Who's up? Who's down? What does it matter? And where is essentially, if you take a snapshot of Iran's domestic politics today and its factions, where it stands today?

Barbara.

BARBARA SLAVIN: Okay. Well, I'll start. I haven't been in Iran since 2006, so this is just from an open source, as they say, and what I gather. There is a fierce debate going on. It looks as though the Iranian neoconservatives, as I and others call them, are on the defensive, primarily because of the economic situation in the country, which is dire, even though oil is approaching $100 a barrel.

Ahmadinejad, the president, has mismanaged the economy dreadfully. He wanted to put the oil money on the table. That was his slogan when he ran for president in 2005. And he has handed out a great deal of money, but he has not produced productive investment in the economy. And there is high unemployment. The inflation is terrible.

Some of the sanctions that have been imposed have also had an effect. Particularly the banking sanctions from the United States and followed by some European countries, I think, have had a real effect and made it much more expensive to do business there.

So I would say they're on the defensive. We've already had one set of elections, the municipal elections, where more pragmatic forces and the old reformers had a bit of a comeback, and then we had the stunning comeback of Rafsanjani as head of the Assembly of Experts as well.

And we have parliamentary elections coming up in March, and I gather that there is an attempt to unify the pragmatic conservatives and the reformers behind at least hopefully one slate or not more than two or three. And that will be another big test to see whether Ahmadinejad really is on the decline.

At the same time, however, the nuclear program is continuing, and the supreme leader appears to be behind Ahmadinejad's drive to have Iran reach a certain stage of capacity in the nuclear program.

So I think that's where we are right now.

MODERATOR: Well, let me ask, if you look at Iran's foreign policy establishment today, the governing foreign policy establishment, who are the moderates?

SLAVIN: Hmm. (Laughs.) In terms of those in government -- and it's always interesting; people will come in as hard-liners and then you immediately see that they're not. Ali Larijani is the new darling.

MODERATOR: Was.

SLAVIN: Well, in a sense was, is. You know, he's still there. He's resigned as chief nuclear negotiator, but he's still there, still very close to the supreme leader, somebody who has experience now negotiating with the Europeans for the last two years, someone who fancies himself the Henry Kissinger of Iran. When I interviewed him in 2006, he was making major overtures to the United States. And I write about this in my book where -- this is an intellectual. His brother went to Berkeley. He wrote his doctoral dissertation on Immanuel Kant.

And I asked him, "What American thinkers do you admire?" And he said, "Hedley." And I said, "Who?" He said, "Hedley." I said, "Hadley? Do you mean Stephen Hadley, our national security adviser?" And he said, "Yes, he's a logical thinker."

MODERATOR: That comes as a surprise. (Laughter.)

SLAVIN: Which, you know, Steve Hadley joked later that it almost cost him his job. But it was a clear example, I think, of Persian tarouf and the first sort of overture and attempt to get something going between Larijani and the Bush administration.

I think he's still an important figure. There are others; the mayor of Tehran, Ghalibaf; Moshen Rezaii, the former head of the Revolutionary Guard Corps, still very important; and, of course, Rafsanjani himself.

MODERATOR: Let me just turn the question to you about sort of the state of play. Is that consistent with what you think?

SUZANNE MALONEY: Well, I think the question you asked is kind of the key uncertainty, both for Iran's future trajectory but also for U.S. policy, because so much of our policy today, as we're trying to pressure Iran to come to the negotiating table, is predicated on this idea that there are divisions and that we can somehow leverage whomever the moderates might be to put pressure on the radical hard-liners, as epitomized by Ahmadinejad, to moderate their course, abandon some of the provocative rhetoric and actions, and come to the negotiating table.

I can say I've been in discussions over the past few days, one the other night with someone who's just out of Iran, who was claiming that Ahmadinejad is fully in control, and the supreme leader is on the run; he's terrified and he's effectively operating on the defensive right now.

I then spent yesterday and much of this morning at an event with a group of purported Iran experts who all said the exact opposite. "No, I think, in fact, Ahmadinejad is an irrelevant figure."

I come out somewhere in the middle, I guess, in that, which is always a good place to come out when it comes to Iran, because it does seem that things can always break in different ways than we expect. But what's been interesting to me is that Ahmadinejad has proven far more relevant than anyone expected when he was running for office in 2005, when he was elected.

Most of the assumptions were that he would be some sort of a pawn, that he would be -- because his office has very limited constitutional authority and historically has been easily sidelined by those of opposing views, he was someone who was inexperienced at national elective office or national office of any kind, you know, it was presumed that he would really just be a figurehead or some sort of a naif or a dupe.

I think we've seen that that has not been the case. He has had an impact. He's made himself relevant. He has asserted himself and inserted himself into issues and foreign policy deliberations which are really not fully within his command, and I think today he is extremely relevant.

I also see trends, as Barbara suggested, leading up to the parliamentary elections that are scheduled for mid-March, that would have suggested to me some sort of resurgence of traditional conservatives, along with the new-generation conservative types, who brought Ahmadinejad to power but who in many cases are extremely disillusioned with what he has done in office. And I would have expected some sort of center-rightist coalition to take the day in March.

I gave that speech several times leading up to the dismissal or the resignation of Ali Larijani. And I have to say that, in effect, to some extent, contradicts some of my previous assumptions. So I think we're all watching, waiting. Ahmadinejad is a key factor.

What is going to happen within Iranian politics? Anyone who tells you today that they know with absolute certainty will probably find themselves on the losing end of a bet sometime soon.

SLAVIN: Can I add just a couple of things there?

MODERATOR: Sure.

SLAVIN: Larijani -- some of the reports suggested that he resigned so that he can participate again in politics and run against the neocons. Also I noticed that one of the people who's going to run for Parliament is Sadeq Kharrazi, former Iranian ambassador in France, who was the author of this 2003 overture by Iran to the United States that many in the audience may have heard about. So I think there's some interesting trends. But I agree with Suzanne.

MODERATOR: Let me ask, as one of those purported Iran experts, I usually get Iran's political developments right about a week or so after they happen. (Laughter.) So the question that I have is, which has somewhat puzzled me, is sort of the resignation, dismissal, departure, whatever it is, of Ali Larijani. It's sort of hard to argue the relevance of someone who continuously had to hold press conferences saying, "I haven't resigned," and then to go ahead in some way.

Is there any light you can shed on --

SLAVIN: Yeah, I think he got caught between the two neocons, I mean, between American neocons and Iranian neocons. There he was; he was the chief nuclear negotiator. He was talking to Solana. He was trying to reach deals and understandings.

You may remember back in -- this would have been the fall of 2006 -- he was supposed to come to the U.N. General Assembly, and a compromise had already been worked out where Iran would suspend uranium enrichment for, you know, a couple of weeks or months, and he would start talks with Condi Rice. And I think he was fully anticipating that that was going to happen. And then Ahmadinejad inserted himself and made his usual bellicose statements and pulled the rug out from under him and made that impossible to achieve.

So I think he's been trying to keep the channels open, you know, for the last year or so, and he finally realized that it's not working with Ahmadinejad constantly intervening. So he's going to try to have influence from the outside. And, you know, if the stars are aligned right, if the pressures are such that the supreme leader might be convinced to distance himself from Ahmadinejad, then perhaps Larijani can come to the fore again.

I will say that the chances for a suspension of uranium enrichment, I think, are a lot less now than they were a year or a year and a half ago. I think the Iranians now will insist on some sort of program. That has been Ahmadinejad's contribution to the debate.

MODERATOR: Let me ask a sort of -- shift the focus to the state of play in the United States. Where is the U.S. debate on what should be done with Iran? There's rhetoric. There's tough sanctions and designations and so forth. Where is the U.S. going in its own factional turmoil?

MALONEY: I'll start. And here we may open a little bit more daylight between Barbara and myself, although I don't really know. I came out of the State Department in May, and so inevitably my views on this question are, to some extent, influenced by that experience.

I continue to be skeptical about the repeated reports that I read in the media and the almost daily questions I receive from people in the media about the prospects for U.S. military action against Iran. I don't mean to suggest that it's wholly impossible, but if I look at the totality of what the Bush administration has done over the past six years, by looking in particular at what has happened since Condoleezza Rice moved over to become secretary of State and really was given this portfolio and what perceive to be fairly clear authority from the president to be the lead actor in U.S. policy on Iran, it has consistently favored some effort, and I think often clumsy, ill-timed and framed in such a way as to make it impossible, but it has consistently emphasized diplomacy, U.S. policy, and some sort of diplomatic resolution to this issue with Iran.

I continue to believe that that is the case. And I see some of the rhetoric and even some of the more aggressive U.S. actions, both in terms of trying to address Iranian influence and specifically the role of Iranian agents and Iranian supply of weaponry in Iraq, and also the efforts to put a more assertive U.S. presence in the Gulf and reinforce our relationship with our traditional Gulf allies.

I see all of those as effectively in support of some sort of diplomatic effort to solve this problem. The difficulty for this theory at this time is the Iranian side. And I think what we've seen is a very different Iranian political context than we might have seen had such of these actions had, say, the overture of the P-5 plus 1 offer to negotiate on the nuclear program, along with a package of incentives that were on the table for the Iranians to suspend their uranium enrichment program. Had that come at a different point in time -- and this does get into the question of missed opportunities in the kind of 2003 to 2006 period -- there might have been greater receptivity from the Iranian side.

The reason for the failure of diplomacy over the past year and a half to two years, I would argue, is very much weighted toward the Iranian side, unfortunately, notwithstanding the mistakes. And I'm happy to get into all of those from our side. But I think, if anything, there's an over-emphasis on the psychology of our leadership and rhetoric, which matters and is significant and certainly helps to frame a context for any kind of U.S.-Iran interaction, but I don't -- I will not emphasize the words "World War III" as having greater weight for U.S. policy than the totality of our actions, including what has been a considerable reversal of the Bush administration on tolerance of some sort of civil nuclear program in Iran.

MODERATOR: Before you respond to this, Barbara, there is a Bush administration policy, and it does have a thesis. The thesis goes something like this, as I understand it; that the series of coercive measures and punitive measures which have been escalating incrementally are designed to split the factions and lead to defection of moderate forces and the marginalization of the hard-line elements, whatever they are.

Is that a valid thesis? And whatever else you want to respond to.

SLAVIN: Yeah, well, I agree with some aspects and disagree with other aspects. I agree with Suzanne that I don't think the Bush administration is going to attack Iran, despite all the rhetoric. It just seems insane, frankly, that they would do this, given the situation in Iraq and given Iran's ability to retaliate throughout the region, in Iraq, in Afghanistan, in Palestine, in Lebanon, the price of oil.

I wrote in my book that if the U.S. attacked Iran, the price of oil would go over $100 a barrel. Well, it's obviously going there already. And, you know, it'll maybe go to $150. And I just don't think that the economies of the world can take that kind of punishment. So I agree with her on that.

I disagree on some aspects of what the Bush administration has been up to in the last -- since Condi Rice became secretary of State. I think there were other opportunities that were missed, which I write about in my book; Larijani's overture. Besides calling Steve Hadley a logical thinker, he named one of his deputies, a man named Mohammed Java Jafadi (ph), to start a back-channel dialogue with the Bush administration. This was in the winter of 2005-2006.

Those of you who might have seen the "Frontline" documentary on Iran, Java Jafadi (ph) gave his first interview on television. But I think I was the first to interview him in Tehran. And he was authorized to start a dialogue, and Hadley refused.

Then, in March of 2006, Larijani publicly accepted a prior U.S. offer for talks just on Iraq. And a week later, Ayatollah Khamenei endorsed it publicly. And the Bush administration didn't take it up. They decided that was not the right time. They were preparing this offer that came in May. They didn't want to distract from that. They didn't want to upset the Iraqis. But they humiliated Larijani and Khamenei because they publicly said, "Yes, we will talk to the United States."

I mean, just weeks earlier, Khamenei had been saying that anyone who talks to the U.S. is a traitor, or agrees to talk to the U.S. is a traitor, and here he was publicly accepting talks on Iraq.

So I would argue that the Bush administration undermined Larijani from that point and that he was never as strong after as he had been early on when he came in as national security adviser. I think that was another opportunity lost.

I would agree that the administration -- Condi is doing her best, but she makes a fatal mistake over and over again. It's one that Madeleine Albright did, and Condi's made it even worse. She tries to distinguish between the Iranian government and the Iranian people. She's always pitching her overtures over the head of the Iranian government to the Iranian people.

When she announced that overture in 2006, May 2006, I asked her -- there was a press conference that she gave, and I asked her, "Are you giving legitimacy now to the Iranian government? Are you recognizing the Iranian government?" And she says, "No." She says, "What's being recognized here is the legitimacy of the negotiating process."

You know, and all this, you know, regime change rhetoric, which we continue to hear from Bush, we continue to hear from Dick Cheney -- just a week or so ago, you know, "Brave Iranians, rise up and overthrow your wretched regime." So I think as long as you have these mixed messages coming from the Bush administration, you're not going to get anywhere with Tehran.

MODERATOR: Before I bring the audience in, I want to close my questioning by asking you, Barbara, what is it -- one, two, three things -- that you want a reader to come out from your book? What is a few things that the reader would come out and say, "Okay, that's" --

SLAVIN: Iranians are human beings --

MODERATOR: That's a good start.

SLAVIN: -- (laughs) -- with a deep civilization and a fascinating history and many diverse views about the form of government they have now, including among those who are in the leadership and those certainly in the clerical establishment; many, many diverse views. Ahmadinejad does not represent Iran writ large.

There were many missed opportunities to improve relations. Sometimes the Iranians got cold feet. More often the U.S. did, at least under the Bush administration. And there were tactical errors on both sides.

And the third -- the Iranian political system contains within it enough flexibility to evolve on its own to something that's more palatable to the Iranian people and to the rest of the world if the external environment is conducive. And by that I mean, please, let's not go to war.

MODERATOR: I'll open it up to any questions and comments you may have.

Ma'am. Would you please introduce yourself, and wait for the microphone.

QUESTIONER: Hi. I'm Teresa Barker (sp), Cartega (sp) Capital.

Two of the three of you made little jokes about the impossibility of predicting anything in Iran. And I'm just wondering, is there some hermeneutic discussion one can have as to why is it that -- is there some structural reason that the U.S. is so wrong so consistently over many, many years about Iran? There's got to be something, because it's the most notable thing about the U.S.-Iranian dialogue, as far as I can tell.

MODERATOR: Whoever wants to start.

MALONEY: I'll start. I mean, look, I'm sure we're wrong about lots of other countries too. (Laughter.) But the obvious factor when it comes to Iran is that we're simply not there. And I will say that my brief time in government gave me a better appreciation of why that is so problematic and difficult.

From inside government, it's a magnification of a problem that I think is true of all of us who are looking at Iran from the outside, which is that we have no feel for the place. We don't appreciate how its politics operate. We don't know who matters. By the time we figure out who does matter, they probably don't any longer.

We have no ability to monitor just the mood on the streets. And you see the sort of communication that goes on. When you have an embassy in a country, when you have business people who travel back and forth, when you have other sorts of broader contacts between society, you have a sense of what's happening. You have a feel for it that just can't be duplicated by the many millions of people who I assume were devoted to Iran within the intelligence community and what is now still a small but at least a growing Iran office within the State Department.

When I arrived in 2005, there was a single desk officer who worked on Iran; that compared with about 70 people on the Iraq desk, and it was a multi-tiered desk that dealt with economics, military, political. Iran, one guy; he did everything. And no single individual can do that job well.

So they now have created an office. There's an office that's been created in Dubai. I think it's been unfortunately characterized by several U.S. senior officials in such a way that it makes it sound more nefarious than it's intended to be, but it's intended to function very much as an embassy in a country might, so that it does have a kind of -- five or six people, people who look at what's happening, try to understand, try to talk to any Iranians they may have the opportunity to meet.

That will help us. But it will still, I think, make it very difficult for us to really get a sense of what's going on inside.

The other piece of our continued difficulty in interpreting Iran is that we tend to impose our own preferences on what we see happening. And so we assume that because -- the Bush administration, at a certain period of time, assumed that the Iranian regime needed to leave the scene, and so therefore we interpreted every bit of evidence, whether it's the student riots of June 2003, which were quite serious but were not, in fact, as is evidenced retrospectively, evidence that the regime was about to crumble, but we tend to interpret everything that we see from the outside to fit whatever framework happens to be governing at the moment.

And so this limited information, lack of experience, lack of contacts and a tendency to impose our own preferences, I think, means that for the foreseeable future, until we have a very considerable U.S. presence in Iran again, we're likely to suffer the same problem.

But I'd also note, of course, in '79 we had quite a few Americans in Iran and we still didn't get it then. So we may just be doomed to failure on this.

SLAVIN: Iranians don't know what's happening half the time, so why should we? I mean, the politics of the country are so fascinating. And, you know, people have said it's kaleidoscopic; it's constantly shifting. Certainly figures who are part of the regime, who've been part of the regime, never disappear.

I compare it in my book to a square dance. Let's say you've got, you know, the supreme leader in the middle and all these figures in a circle, and from time to time one will come in kind of a do-see-do and then go back out again. You know, so they never disappear, like Rafsanjani. Every time you count him out, he pops back up again.

I think that also there is electoral politics in Iran, within limits. They had seven, eight candidates for president in 2005, and you couldn't immediately predict at the beginning of that who was going to be the victor. Khatami was an upset candidate. So was Ahmadinejad. So it's impossible to predict because there is some real politics that goes on within the regime loyalists, within the circle.

MODERATOR: Go ahead.

QUESTIONER: Don Oberdorfer from SAIS.

Suzanne, for those of us who haven't been paying as close attention as you obviously have been, could you describe what was the reversal of Bush policy toward the civil nuclear program that you referred to? What happened, and when did it happen?

MALONEY: I think if you look at the Bush administration's starting point on issues like the Bushehr reactor and the relationship with Russia, and if you see what the secretary of State offered in May 2006, which was effectively some tolerance of a future Iranian full fuel cycle, that, in and of itself, is a considerable reversal.

The U.S. has effectively dropped the issue of Bushehr in our dealings with Russia. We obviously have many other issues when it comes to Iran specifically, and more broadly with Russia. That is no longer a major sticking point in our relationship.

One of my colleagues at State used to joke -- and I use this one often, so I apologize if anyone's ever heard it before -- but when the Bush administration first came into office, it opposed even nuclear dentistry for Iran. (Laughter.)

By 2006, the idea of Iran having a civil nuclear program was fully on the table and had been endorsed by the secretary of State in a public setting. So that is a fairly considerable reversal. And I think if you look at that, you can engage in kind of a counterfactual process. If such an offer had been made in 2003, could we have found some way out of this box on the nuclear program? Because, of course, by the time that offer was made, the Iranian position had hardened.

And here I wouldn't even give full credit to Ahmadinejad. I think it hardened under the experience of the negotiation process with the EU-3 to such a point where the decision to give up the suspension of uranium enrichment was made prior to Ahmadinejad's inauguration and was endorsed by what appeared to be the full spectrum of opinion, at least among the Iranian elite.

So, you know, the difficulty is that the timing was very much off. And the Bush administration came to this decision, came to this endorsement, at such a time also that Iranian leaders became very skilled at using the nuclear issue and even this question of suspension as a rallying point for their population. And so even if an Iranian leader today wanted to suspend, he would have to do some fairly fancy footwork to backtrack publicly on a position that the regime has staked over and over again.

MODERATOR: It was back there, a question. I'm not going to get into what nuclear dentistry is. (Laughter.)

Go ahead, sir.

QUESTIONER: Barry Blackman (sp), Stimson Center.

Logically, Iran has every reason to develop nuclear weapons to fill its nationalist destiny, Persian destiny, deter the U.S., its sworn enemy, which over the last 20 years has built more and more of a military presence on its borders, and, of course, to counter the Israeli nuclear force.

Given those incentives, what is it the U.S. can offer a new administration -- what could a new administration offer that could cause Iran to give up that weapons program?

MODERATOR: Before answering that question, Barbara, if you can marry it to what does Iran want.

SLAVIN: (Laughs.) Okay.

MODERATOR: And can it be accommodated by the United States?

SLAVIN: Well, as Suzanne points out, Iran wants a lot more now than it would have earlier. Had the administration sought to enter into broad negotiations in 2003, we would probably be in a different situation.

In my book, I compare Iran to the old comedian Rodney Dangerfield. I say Iran wants respect. It wants to be treated like a grownup. It wants to have a place at the table. It wants to be recognized as a very important country in that part of the world.

So whether you're talking about some sort of new security architecture, GCC plus two plus three plus four, with Iran in a prominent position, certainly treated as important as Saudi Arabia, if not more so, definitely the Iranians want that.

They also want an end to sanctions. You know, U.S. sanctions, which have now been spreading, have had an effect, particularly in terms of the oil industry and natural gas. I'm told that China cannot provide the expertise that the Iranians need to develop liquefied natural gas in particular, that they really do need western companies for this. And if they don't have oil, what do they have?

And their exports have been going down. There was a study that was done at Johns Hopkins suggesting that they would not even be able to export oil after, what was it, 2015 if current rates of consumption continued and if they didn't get new investment in the oil industry. So they have a lot of vulnerabilities.

And they want U.S. recognition. I mean, that's a double-edged sword for them, but certainly they want this acknowledgement of how important they are and how important they are likely to continue to be in the region. I think the U.S. has a lot of cards to play with Iran.

I disagree with those who say we're now -- you know, obviously we're weaker than we were before, particularly because of Iraq. I mean, the strategic stupidity of eliminating Iran's major rival and having no game plan to fill that power vacuum is still something that is absolutely stunning. But I think we still could recover from that.

MODERATOR: What does acknowledging Iran, respect, mean? I mean, does that mean acknowledging a sphere of influence for Iran in the Gulf? Why should we do that?

SLAVIN: Well, recognizing that this is a legitimate government of Iran, for starters. I mean, it's been there for 30 years. And the Bush administration, you know, it can't even somehow bring itself to recognize that this is a legitimate government of Iran. It does so by inference, but it never does so publicly. Stop calling for Iranians to overthrow their government, at least now, at least for the time being. I think that would be very important. Speak about Iran in respectful terms.

MODERATOR: Ma'am, go ahead.

QUESTIONER: Thanks. Laura Holgate from the Nuclear Threat Initiative.

We find ourselves in the middle of a process that ElBaradei designed at the IAEA to try to resolve some of the outstanding questions on Iran's nuclear file. It's not hard to imagine it would come to the end of that without really addressing the fundamental questions that guide U.S. policy and concerns on Iran.

And yet somehow Iran has managed to turn the tables and focus the conversation among the non-aligned movement and others of its colleagues on its rights to nuclear technology, as opposed to its violation for decades of its safeguards agreements.

Is there any way we can find a legitimate context to resolve that decades-long deception in a way that is seen as legitimate by the non-aligned movement and others who are focusing their conversation around rights and nuclear technology?

MALONEY: I'll just speak to that briefly, which is I don't know that Iran has been as successful as you suggest in pitching its case internationally; certainly for a period of time. But if you look at the process of moving from the IAEA discussions to the U.N. Security Council, that was conditional upon the vote of the board of governors of the IAEA, which did include traditional Iranian allies, included members of the non-aligned movement. And all of those states voted in favor of referring Iran to the Security Council.

So I think where Iran has been successful in framing this as a question of rights has been very much at home. And this is something that gives the administration great contortions, and I suspect it's something we would never be able to address in a really coherent way because we just don't speak to the Iranian people. We don't have the same credibility or the same ability to interact through their media. So I tend not to worry about that.

It's unfortunate that they've pitched it at home, that they've rallied their population around this. But that's not my problem and it's not something that is official U.S. policy. I think we can resolve the broader question of what do we do with a nonproliferation regime which seems to give traction to those who want to skirt loopholes and focus on this question of rights instead of responsibilities is one that I happily leave to people who are nonproliferation experts to try to fix.

MODERATOR: (Inaudible.) Ma'am, right --

QUESTIONER: Hi. Camille Caesar from the Commerce Department.

I'd like to ask you all about the population of young persons in Iran. You alluded on the panel to the unemployment issue. But then I read a lot and hear a lot from Iranian-Americans especially who are in the area locally about the drug problem that they have and then also this sort of increase in unwanted pregnancies among young women who are perhaps not unmarried, but they may be in marriages of limited duration. And so I wonder about that.

And then also I'd like to know how this development, as it is, fits into the larger paradigm of Persian nationalism as we look ahead over the next 15 to 20 years, and also as you consider Iran as being long-term for us, a non-status quo power in the region. Thank you.

MODERATOR: Barbara.

SLAVIN: Well, (Ray ?) argues that it is a status quo power and not very revolutionary anymore in his excellent book.

The young people are key. And I have a whole chapter about them in the book. I think they really are in crisis. You have something like 70 percent of the population is under the age of 30. The government has not been able to keep pace with their demands certainly for good jobs. And you have enormous numbers of people who have graduated from university now, including 60 percent of the students in university now are women, so you have a lot of educated people and not a lot of places to go; huge brain drain, which has accelerated since Ahmadinejad came in -- a lot of young Iranians leaving, trying to find jobs elsewhere.

And the drug problem, as you mentioned -- you know, what happens when you try to ban alcohol, people will find something else. The wealthy still get alcohol. There's a very active black market. It's extremely -- people are always offering you drinks when you go to parties in north Tehran, which is a little embarrassing.

But in poorer areas, you have cheap heroin and opium readily available. I think the addiction rates for heroin are something like 400 times what they are in the U.S. per capita. So that gives you an idea of the problem. And the U.S., of course, in going in and overthrowing the Taliban, has exacerbated this since Afghanistan is now pumping out more drugs than ever before. And one of the routes as it passes, you know, on its way to Europe and the West is to go through Iran, where it's very easy to get.

Some people even say that the government doesn't really crack down on this that hard because they like the idea of having people, you know, strung out on drugs because then they won't make problems for the regime. So it's a very, very serious problem.

In terms of the unwanted pregnancies, there is a practice in Shi'a Islam called temporary marriage. Let's see if I pronounce it right -- Holly, you should help me -- sigheh.

MS. : (Off mike.)

SLAVIN: Sigheh (corrects pronunciation), okay -- which means you can be married for an hour -- (laughs) -- if you want. Some people call it legalized prostitution. So I hadn't heard about the pregnancy rates going up from that, but obviously that would be an issue.

Young people -- you know, they want change. They definitely want change. But they've been kind of demoralized. They went through a period where their hopes were raised by Khatami. There was tremendous relaxation of restrictions, social restrictions in Iran, in the late 1990s in particular. And that all came crashing down. There were protests in 1999 which were severely repressed, and the student movement never really got its act together again after that.

So they're not -- being overtly political doesn't get you anywhere, although you still do see occasional demonstrations now and again against Ahmadinejad. They're very cynical. It's hard to see them getting enthusiastic, really, about anything or anybody. They're apolitical. And it's really quite sad.

Hopefully, again, the system can produce some sort of new faces, maybe even Khatami again, that might arouse some enthusiasm from the young. But the government is going to have to make life a lot easier for them, and that's not happening right now.

MALONEY: Can I just actually -- two quick things. One is this whole question of the student movement, which has, I think, been a real mystery to those of us who watch Iran, or certainly from a U.S. government point of view, a lot of people put a lot of interest over time in what the student movement might do, because obviously it was at one point a coherent organization that was at the forefront of social change in previous eras of Iranian history, and there was a lot of expectation.

The government has been very calculated in repressing key individuals, and that appears to have decimated the student movement. But I think that's an uncertainty that I certainly -- I'd love to read a great paper on the status of the student movement and what's happening.

And on that note, let me put in a plug for some of my colleagues at the Brookings Institution --

MALONEY: In the Wolfensohn Center, there is a youth initiative that is putting out a series of papers on this whole question of the youth bulge across the Islamic world and has a terrific paper on Iranian youth, co-written by an Iranian-American economist. And I'm sure if you go to the Brookings website, somehow -- we have a new website -- you may be able to find it. But I'm happy to give you the citation if you have trouble.

SLAVIN: One other thing I forgot to mention. There was a very good survey done by Reader's Digest in the spring of 2006 looking at attitudes, and it discovered that the most pro-American Iranians were over the age of 45. When they looked at 19 to 35, they asked them who their favorite foreign leader was and it was Vladimir Putin.

So young Iranians, I wouldn't count on them to bring western-style democracy to Iran. I think they're looking for competent regime that will produce jobs and economic prosperity and defend Iranian interests.

MODERATOR: So another plug for middle age. (Laughter.)

Go ahead.

QUESTIONER: I'm Jeremy Stone with Catalytic Diplomacy.

Returning to this question of war between Iran and the United States, it certainly doesn't have zero probability. If it did come about, what would be the most likely mechanisms? For example, other than a Bush deliberate attack on nuclear reactors, there's the possibility of the Bush administration attacking Iranian bases across the Iraqi border, leading to a kind of war by escalation. And there's the possibility of the Israelis taking a catalytic attack on Bushehr or some other place and urging the United States to jump in and follow this up before retaliation occurs.

I wonder if you could say something about what is the overall likelihood of war? What are the mechanisms that might bring it about, even though it would be crazy for Bush just to attack them, as you said?

SLAVIN: Well, Richard Haass, whom I must quote, I do quote, says the chances are two out of 10. You know, I think that sounds about right.

QUESTIONER: What would be the mechanisms? What's the predicate? How does it come about?

SLAVIN: How does it come about? I can't see that the U.S. just does cross-border raids. I mean, if the U.S. is going to bomb Iran, it's going to bomb Iran, and it's going to do Natanz and Isfahan and all the nuclear sites, and probably a lot of conventional military sites as well. And it'll bomb Iranian ships in the Persian Gulf to prevent them from retaliating. It'll hit all the missile sites that Iran could use to attack the Saudi oil fields. I mean, it really would be World War III in terms of the scale of it. I don't see any incremental attacks. It doesn't make any sense.

QUESTIONER: What about the Israelis?

SLAVIN: The Israelis cannot do the job. So if the Israelis -- I mean, if the Israelis convince the Bush administration, "Let's do it together," I suppose that's one possibility. But the Israelis alone can't do this. Iran is too far away. There are too many targets to hit.

QUESTIONER: But, I mean, they could start it.

SLAVIN: Yeah, but if they start it, they would have to have Bush administration permission, because, I mean, you know, they would certainly -- it would have to be discussed in advance. And the whole region and the whole world would assume the U.S. was behind it anyway.

MODERATOR: Judith Kipper.

QUESTIONER: Thank you.

It seems -- I'd like to hear all three of you briefly. It seems the U.S. missed a golden opportunity, potentially, in 2003 when the Iranians sent a rather extraordinary message, though the secretary of State at the time said in front of the Foreign Relations Committee that, "Oh, well, lots of things come across the transom. I never saw it."

In any case, I know all three of you are familiar with that message, and I'm wondering if you believe, should the administration add to their tool kit of rhetoric in war real diplomacy if the U.S. went back to that and really engaged in dialogue, if you believe those issues are still on the table from the Iranian side.

MODERATOR: I must confess, that's an area of continued controversy playing itself out on the pages of The Weekly Standard. I just don't -- you spent a lot of time on this in the book, and there's an annex in your book --

SLAVIN: Yeah, I've got the offers. It's printed in the annex to the book.

MODERATOR: If you could just lay out what happened in brief.

SLAVIN: You know, I have to be honest. I'm learning more about this every day. But it was a trial balloon. It was something that Sadeq Kharrazi, who was then the Iranian ambassador in Paris, put together. He is -- his uncle at the time was the foreign minister of Iran, Kamal Kharrazi. And he's also related by marriage to the supreme leader. And he's someone who's advocated dialogue with the U.S. for a long time.

So he put this together. Tim Guldimann, who was then the Swiss ambassador in Iran, helped him. And the final edits, which you will see in the annex of the book, were done by Javad Zarif, who was then deputy foreign minister in Tehran. It was before he came to the United Nations as Iranian ambassador.

And, you know, this was a moment in time when the Iranians, frankly, were quite nervous. The U.S. had just done in three weeks what they failed to do in eight years. They had removed the regime of Saddam Hussein. So they were feeling vulnerable. They had the Americans on both sides of them, in Afghanistan and in Iraq. And you still had the Khatami government, which was very pro-engagement; had always been pro-engagement.

So they sent up this trial balloon. It's an agenda for talks -- Iranian aims, U.S. aims, and then the way in which they would have simultaneous statements and announce their first meetings and so on.

This also came in a context. There had been meetings in Geneva and Paris from the fall of 2001 through May of 2003 on an almost monthly basis where Iranians and Americans had been negotiating directly at a high level with nobody else in the room, something we've yet to get back to. Ryan Crocker and Zal Khalilzad led the talks on the U.S. side, Javad Zarif on the Iranian side. There were a couple of other Iranians prior to that. So they had a sense of each other and a good feel for each other.

So this -- by the way, it wasn't a fax that appeared mysteriously in the State Department. It was sent by secure fax from the Swiss embassy in Tehran to the Swiss embassy in Washington and hand-delivered to the State Department --

MODERATOR: This is a routine way.

SLAVIN: -- which is the way all messages are sent from the Swiss, who represent U.S. interests in Tehran.

It was looked at. I talked to a number of people in the State Department who saw it. Some of them are still with the State Department, so I can't tell you their names. But it got a good look-over, let me tell you that. Armitage saw it. Colin Powell saw it. Condi Rice claims she never saw it. Other people in the NSC certainly did. Trita Parsi, who's written a very provocative book himself on the U.S., Iran and Israel, and was then working for Congressman Bob Ney, says that he delivered it to Karl Rove's office. So clearly people were aware of it.

But this was -- you know, Baghdad had just fallen. The U.S. had declared mission accomplished in Iraq. And nobody was interested. They thought, "Oh, we don't need the Iranians. You know, they're feeling the heat now, you know, because we've just knocked off Saddam and they know they're next, and we don't need them."

So it simply, you know, didn't get a good reading. John Bolton found out about it and complained to the Swiss government. (Laughter.) By the way, the Swiss government never reprimanded Tim Guldimann. That's another urban myth. You know, Bolton complained and there was some grumbling from the cons and the neocons on the U.S. side, but Guldimann himself was never reprimanded for doing this. He was doing his job. He was passing messages from the French -- sorry -- from the Iranians to the Americans. That was his job.

Suzanne is giving me a wrinkled nose, so she probably has something else to say. What do you say?

MALONEY: I was not at the State Department at the time of this offer, so I can't speak to what went on. I know something about it from my time there. And I tend to think that certainly the way that this particular episode has played out in the public sphere has been a little bit overinflated.

And I say that agreeing fully that in 2003 we lost an opportunity, because I think that this Geneva track dialogue was the opportunity. It was the first time in recent years, at least, if one wants to discount the Iran-contra experience, perhaps the first time since the revolution that you had a persistent, enduring Iranian-American negotiation that took place at a reasonably senior level, not obviously at the very top, but it was over issues of mutual concern and that actually produced constructive outcomes.

So to my mind, that is the opportunity which the U.S. cut off in 2003, at least in the public sphere, reportedly in response to the terrorist attacks on a housing compound for expatriates in Saudi Arabia --

SLAVIN: By al Qaeda, not by Iran.

MALONEY: -- that at least, again, from the public sphere, the U.S. government understood to have been planned by al Qaeda operatives who were under house arrest in Iran at the time. So to my mind, the cutoff of that dialogue was the golden opportunity to create something more lasting and that could have developed into something else.

I look at the offer that did come across the transom in a somewhat irregular way, through the Swiss channel, but not as an authorized communication from the Iranian government, as Swiss channel messages are intended to do. It clearly had the involvement, the explicit acknowledged involvement in its actual writing by the Swiss themselves, which is also irregular and effectively beyond (their brief ?) as the communications channel. And clearly it is something that I think ought to have been explored.

Would it have been clear to me, sitting in the State Department at that moment, that this was a truly authorized grand bargain that had the imprimatur of the entire senior leadership? Absolutely not. I would have viewed it as a trial balloon that, in the context of these other dialogues, I would have looked to explore.

I tend not to be optimistic about the prospects of resolving all the issues at once, because I think on their side, as much as on our side, they're far too complex and enduring to wrap up with one neat three- or four-page fax. But I think the focus on that particular document maybe understates the story that is to me most interesting about 2003, which is this dialogue which was successful -- both sides have acknowledged as successful -- and then was cut off, never to be re-established.

SLAVIN: Well, if I could just add on the dialogue, what happened was -- I wrote about them on the front page of USA Today, and the administration was embarrassed. Particularly Condi Rice was embarrassed that they were revealed. They were secret. They were so secret that the American diplomats who took part were not allowed to keep notes for fear that it would leak and the parts of the government represented by John Bolton and Dick Cheney's office would pounce and destroy them. And, of course, that is indeed what happened.

I believe that the bombings in Saudi Arabia were a pretext for ending the talks and they were not the real reason.

MODERATOR: David.

QUESTIONER: (Inaudible) -- that were not -- David Ignatius from The Washington Post -- that were not going to war with Iran, that the eight-out-of-10 option is the one that will prevail and that the Bush administration's policy is pretty much what it says it is; namely, escalating economic pressure on Iran and maintaining as broad as possible a coalition.

The question I have for all three of you is, will it work? What effect will it have? In particular, will it drive a wedge between the Revolutionary Guard extreme elements, who were targets of the latest round of sanctions, and other people in the regime? What effect will it have on Iranian public opinion, thinking about the Iranian elections coming up? And assuming the policy is what they say it is, how will it work?

SLAVIN: I'll start if you want. I think there's a chance it could work. If we, again, don't do anything stupid and attack Iran and allow the internal politics of Iran to play out, I think the banking sanctions in particular have been very effective.

The Revolutionary Guard sanctions -- I'm not sure what impact it really will have in Iran. I think that's more of a propaganda gesture, frankly, than anything else. It could hurt in one way, though, and that is that most of the people that the U.S. would have to deal with, if we ever do sit down and talk to Iran, are veterans of the Revolutionary Guard, if not members of the Revolutionary Guard currently, including many Qods Force officers.

This gentleman, Mohammed Java Jafiri (sp) that I mentioned, is an ex-Qods Force commander. The Iranian ambassador in Baghdad is a Qods Force commander, according to General Petraeus. Larijani himself is a veteran of the Revolutionary Guard. So I worry a little bit that this might make diplomacy a little bit more difficult.

But I think that there is a chance, if the economic pressure is maintained but not military action, that could have an impact on Iranian decision-making and could have an impact on the internal scene so that we do see a return of some of the more pragmatic figures.

MODERATOR: So it's going to work.

SLAVIN: Maybe. I mean, it has to be carefully calibrated. And again, some of these gestures toward the Rev Guards, I thought, were misplaced. I don't think that was necessary.

MODERATOR: Let me just say, today is the day we celebrate competition. So in that spirit, Jessica Matthews of Carnegie. I'm afraid this has to be the last question, given our time restraint.

QUESTIONER: Thank you.

I wanted to ask -- I mean, one can imagine the new administration evolving a sensible and realistic policy. But what about Congress?

SLAVIN: (Laughs.)

QUESTIONER: You know, what I've seen the last year especially, after spending time up there, is that it's a cartoon. And the incentives are all on the part of making the cartoon grosser and grosser and grosser. And there's no disincentive. So can either of you sort of sketch what -- I mean, do you see any possibility for congressional support for a sensible policy, or can you imagine a strategy for getting there?

MALONEY: I have trouble seeing any real penalty for people whose primary objective is to pursue elective office in talking tough on Iran. So I suspect that that dynamic, which has been fairly consistent, really, since the revolution and, if anything, reached a peak during the Clinton administration with the passage of ILSA and the efforts to pass the more restrictive unilateral sanctions which the Clinton administration itself adopted under executive order, I don't see any real change there. And I don't worry about it terribly.

At the same time you have all this congressional action, I think you also have interest on the part of a lot of folks on the Hill in establishing some sort of parliamentary dialogue with the Iranians, a perennial list that seems to grow every year of various congressmen and senators who are raising their hands to be the first to go to Tehran. So I think that you do have the signals from the opposite side.

If I can just quickly hit the question that was just asked about the likelihood of effectiveness of the Bush administration, I think Barbara raised the key issue, which is these banking restrictions. That's been the one tool that this administration has found that appears to create some real pain.

We thought we had sanctioned ourselves into irrelevance with Iran, but these banking restrictions, which effectively begin to cut Iran off from the international financial system as a whole, appear to have some real impact. And so I think the extension of those sanctions could conceivably be effective, particularly as it impacts those who have business relationships outside of Iran, the traditional merchant community, who've always had some sort of influence within the Islamic republic.

The mitigating factor, of course, is the price of oil. And, you know, as we inch upwards of $90 a barrel -- and Iran can anticipate somewhere in the neighborhood of $50 (billion) to $60 billion a year in revenues from oil -- it is, to a large extent, insulated. Business will be more difficult. It will be more expensive. There will be a lot more headaches.

But there will also be a lot more opportunities for, say, the companies affiliated with the Revolutionary Guard and other elements of the regime to do well in an environment of lesser competition. And money will change hands in some way, shape or form, even if letters of credit can't be acquired. So I think that it can have some impact, but it's not clear that it's going to turn this regime, which tends to act more aggressive when backed into a corner than more accommodating.

MODERATOR: Barbara, did you --

SLAVIN: I agree completely.

MODERATOR: Well, I'll stop the meeting at this point, because one of the things we have to do is stop on time. So I thank you very much for coming, and thank you to our speakers. (Applause.)

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